The IAMB discussed the scope of the audit to be undertaken for the period ended December 31, 2005 and the follow-up work in regard of the special audit when it met on December 28, 2005. As the Iraqi member, his alternate and the President of the Iraq Board of Supreme Audit were unable to attend the December meeting, a further meeting of the IAMB was scheduled for January 23, 2006 to discuss the remaining issues. Following requests from the media, the IAMB held a press briefing on 28 December 2005 to respond to various issues concerning the DFI. The full webcast of that briefing was posted on the IAMB website at http://www.iamb.info/webcast/wc122805.htm

Audit of the DFI

The member from Iraq briefed the IAMB on the progress with regards to the audit of the DFI for the period 1 July – 31 December 2005. As a result of the extension of the mandate of IAMB, this audit will be conducted under the oversight of the IAMB. Changes in the Request for Proposal had been made to this effect and to include under the scope of audit all the spending ministries of the Government of Iraq. It was also stressed that since many deficiencies were found in the spending ministries, there will be a need to do more audit work in that area, with particular emphasis on internal control.

The IAMB approved the process and concurred with the recommendation of the Government of Iraq to proceed with the DFI audit which is expected to be completed by mid-May.

Follow-up on the implementation of the recommendations from the previous audits

The IAMB was briefed on the progress the Government of Iraq had made in implementing the previous recommendations of both the Auditors and the IAMB.

Metering

The IAMB was informed that no progress had been made with regards to the metering contract.

The IAMB expressed concern that this process had taken a long time, and urged the Government of Iraq to expedite the process.

Controls in the Ministries

The lack of metering notwithstanding, the IAMB was informed that controls were in place with regards to the oil quantities exported and the issuance of invoices in respect thereof.

It was also explained that the reduction in the export of fuel oil that was reported by the auditors was related to the security situation in the country (especially in the north), and the weather conditions in the south. The IAMB was informed that the segregation of duties pertaining to tender opening in the Ministry of Oil was being addressed.

The Board was also informed that the refund of $5,687,960 to the DFI as a result of a change in the source of funding was being addressed by the Ministry of Finance, although no response had yet been received from the U.S. authorities.

The Representative of Iraq also informed the IAMB that the control weaknesses raised by KPMG with regards to the reconciliation between the Federal Reserve Bank of New York, the Central Bank of Iraq (CBI) and the Ministry of Finance had been addressed and that cash movements between the Ministry and the CBI were now streamlined and reconciled.

The Board of Supreme Audit has submitted a report to the Council of Ministers which includes instructions and guidelines to address weaknesses in internal control procedures with regard to contracting. A directive has been issued by the Council of Ministers to all ministries to comply with these instructions and guidelines.

The IAMB intends to continue to follow up on measures taken to implement the recommendations of previous audits.

Briefing by the United states Department of Defence

The IAMB followed up on the results of the special audit of sole-sourced contracts, and in particular the Kellogg, Brown and Root (KBR) task orders funded from the DFI. The U.S. Government informed the IAMB that a global settlement of all six DFI funded task orders under the KBR contract was reached between the U.S. Government and KBR on December 22, 2005. The settlement provided for a reduction of contract costs of US$9 million.

The IAMB resolved to request an independent verification of the settlement as well as a review of the remaining sole-sourced contracts to determine whether excess costs were incurred that would be the subject of renegotiation.

Other Business

The IAMB re-elected Mr. Halbwachs as the Chair for 2006.

The IAMB adopted revised terms of reference to reflect the extension of its mandate to 31 December 2006.

Press Release

The IAMB agreed on a press release.

The next meeting of the IAMB has been tentatively scheduled for May 30-31, 2006.